USD/CAD Market Update

Current Level: Low-1.36s (24hr range 1.3620 to 1.3645)

USD/CAD is trading at 1.3637 this morning, essentially unchanged from Wednesday's close and well inside RBC's 1.3600 to 1.3680 expected band. The intraday range has compressed to a 25-pip 1.3620 to 1.3645, the tightest of the week. Yesterday's tape did the heavy lifting: Brent fell more than 12% intraday to a 96.73 print before stabilising above 101, WTI fell 13.3% to a 88.66 low before recovering to the mid-95s, and the DXY tagged its lowest level since the Iran war began in late February. Today is consolidation, with both sides of the pair waiting on tomorrow's data.

Market Overview:

Risk appetite is firm but quieter than the post-Axios surge that defined Wednesday. Equity futures point to fresh highs led by semiconductors, with the memory super-cycle adding fuel to the tech tape. Per CIBC, SanDisk has run roughly 3,700% over the past twelve months and 400% year-to-date as the cycle deepens. Global bond yields are drifting lower, extending Wednesday's risk-on rally. The dollar is mixed against the G10 basket, having given back some of yesterday's losses overnight as the market prices the unwind of the Iran-driven safe-haven bid against the relative resilience of US growth. The combination of stable oil, lower yields, and a softer dollar is the textbook reverse of the war-risk regime, but the move is now contained as positioning is judged to have reset.

Iran Response Watch:

Tehran is reviewing the one-page US memorandum of understanding negotiated through Pakistani intermediaries, with a response expected within the next 48 hours per CIBC. The framework includes potential sanctions relief, a moratorium on Iran's enrichment program, and a phased reopening of the Strait of Hormuz. Per CIBC, investors continue to view the conflict with a glass-half-full lens and are pricing an end to military operations by month-end. Per RBC, the commodities desk is more sceptical: an MoU to resume negotiations over a thirty-day window does not translate into immediate shipping volume or production restarts, and current outage estimates would imply roughly another 450 million barrels of crude and refined products lost over that period if unchanged. The trading consequence is that the headline risk remains two-sided. A firm Iranian acceptance can extend yesterday's USD repricing; a rejection, with President Trump warning that "the bombing starts" if terms are refused, can flip the tape sharply the other way.

Friday Jobs Cluster Is the Binary Event:

Tomorrow at 5:30 AM Pacific delivers a joint US and Canadian employment release. US Non-Farm Payrolls consensus is for a sharp deceleration to 60K from the prior 178K, with the unemployment rate steady at 4.3% and Average Hourly Earnings at 0.3% month-over-month. Canadian Employment is forecast at a 5.1K headline gain against 14.1K prior, with the unemployment rate steady at 6.7%. The setup remains asymmetric for USD/CAD: a soft US print combined with a Canadian beat could press the pair through 1.3600 and toward the 1.3526 year-low quickly, while a US beat with a Canadian miss could lift the pair back toward the 1.3672 to 1.3728 sellers' zone. The Iran narrative has reduced the bar for the bearish USD/CAD scenario but has not displaced tomorrow's release from the centre of the week's calendar.

Canadian Data/Outlook:

Domestic news flow is light today. Per CIBC's Central Bank Watch, money markets price a 3% probability of a 25 basis point hike at the June 10 Bank of Canada meeting and 0% probability of a cut, down from 10% hike-pricing on Tuesday. RBC's central bank forecast holds the BoC overnight rate flat at 2.25% through Q4 2026. CAD is underperforming most of its G10 peers on a cross basis even as the headline USD/CAD pair has compressed, consistent with a tape driven by US-dollar weakness rather than CAD-specific buying. CUSMA renegotiation risk continues to act as an overhead drag on any sustained CAD rally. Tomorrow's employment report is the next BoC-relevant data point, and absent a sharp downside surprise, the hold-through-2026 trajectory is unlikely to shift.

Fed Watch:

Per CIBC's Central Bank Watch, money markets price a 0% probability of either a hike or a cut at the June 17 FOMC meeting. The longer-dated December outlook has cooled slightly versus Wednesday. CME FedWatch readings now show roughly 36% probability of a single 25 basis point cut by year-end, with a 51% probability that rates remain unchanged through December. RBC's published forecast continues to hold the Fed Funds upper bound flat at 3.75% through Q4 2026, treating any cut as a tail risk rather than the base case. The day-on-day cooling is consistent with markets pricing the relative resilience of US growth as the Iran-risk premium unwinds, with the persistent inflation backdrop limiting the Fed's room to ease.

Technical Picture:

Resistance: 1.3672 first per RBC's technical desk (the old support trendline now flipped), then 1.3728 above (last week's post-FOMC high zone).
Support: 1.3526 first (this year's low cluster), then 1.3482 below, with 1.3420 (September 2024 low) as the deeper test.
Outlook: RBC's technical desk reaffirms the bearish bias from last Thursday's close below 1.3598, treating any rally to 1.3672 or 1.3728 as a selling opportunity. The compressed range today is consistent with consolidation between the broken trendline above and the year-low cluster below, with tomorrow's data the catalyst to choose direction.

Week Ahead:

Tomorrow's release is the only major scheduled catalyst within the 14-day window. The next Bank of Canada decision is June 10 and the next FOMC is June 17, both outside this report's horizon.

Other Notes:

• Per RBC, Restaurants Canada surveyed nearly 50% of establishments reporting declining sales and 54% reporting reduced traffic; fast-food sales fell 2% year-over-year and bars fell 1.1%, while upscale full-service rose 4.6%, illustrating a bifurcation across consumer income tiers.
• Per CIBC, precious metals are extending gains with silver bulls watching for a breakout. The next major resistance flagged by the desk is US$96 per ounce, with all-time highs the upside test if that level gives way.